Decline in tax breaks forcing Canadian devs to relocate

A decline in tax breaks in Canadian provinces is prompting developers to relocate.

Tax deals recently expired in British Columbia, one province which only recently had tax breaks implemented, and other westside provinces has meant some studios can no longer afford staff costs.

As a result of this, developers have been moving eastward to Nova Scotia and Quebec.

“Vancouver has generally been the barometer or trendsetter in Canadian development,” said John Jennings, executive producer at Longtail, a studio in Halifax, Nova Scotia, a province that implemented subsidies in late 2012.

“Right now, it’s seeing a decline in permanent employment for developers and a shift to project-based, or even shorter, contracts. Salaries grew high there during the boom of the early 2000s, due to competition for the best staff.

“With the decline of subsidies in British Colombia, studios can no longer support those salaries on a permanent basis. We’re certainly seeing development shift increasingly eastwards within Canada as a result. There are probably double the number of studios in Halifax now, compared to five years ago.

Develop spoke to a number of studios across Canada to find out what the affect of tax breaks may be for when they arrive in the UK.

“Chasing the subsidies around the country is something we need to avoid though. We need to aim for long-term stability and avoid a dependency on subsidies caused by offering crazy salaries that are reliant on subsidies being in place,” Jennings added.

Also based in Nova Scotia, HB Studios says the lesson is to see tax breaks as an added bonus, not the foundation for a business.

HB founder Jeremy Wellard said: “HB had been around for eight years before the Nova Scotian Digital Media Tax Credit was introduced in 2008, and we had a staff of around 130 people by then. The success of the company was established well before the DMTC came into play and we endeavour to not rely on it for any of our operations, because it is not particularly secure.

“The DMTC was up for renewal in December 2012 and it was only at the last minute that the provincial government decided to extend it for one year to allow time to fully review it’s worth. Nobody knows whether it will continue after the end of 2013.”

Furthermore, Autodesk’s senior manager of media and entertainment industry marketing, Maurice Patel, suggested that rising living costs in western Canada have also been an issue: “In the last few years there has been a shift to the East driven in part by a steep rise in real estate and living costs in the West.”

Read more on the trends and issues facing the Canadian games industry in our latest Canada region focus.